2014 M&A deals to “be felt by consumers for a long time to come”

DetailsEditor | 14 February 2015




Some say it was the year of online video, others the year of SVOD but 2014 will go down as the year of the deal, transactions whose significance will define the entertainment market for years says management firm PwC.


PwC dealsIn its report, Momentum builds: US entertainment, media and communications deal insights, PwC says that M&A in the Entertainment, Media & Communications (EMC) space will continue to be active as market participants take risks to position themselves for the future marketplace which focuses on subscriber stickiness, efficient and well optimised networks and creating and maintaining the rights to compelling content.

PwC calculates that overall deal values increased over 90% in the 2014 financial year despite consistent deal volume year over year. Looking at the drivers for full-year 2014 with deal values increasing compared with 2013, PwC noted that just two transformative deals

in the cable sub-sector — AT&T’s purchase of DirecTV and the Comcast/Time Warner tie-up — accounted for $94 billion in total deal value and Facebook’s announced purchase of WhatsApp for $19.5 billion. Broadcasting and communications deals contributed greatly to the sector’s total, surpassing segments such as publishing and advertising.

Looking at activity in various EMC sub-sectors, PwC said that the consolidation of AT&T with DirecTV and Time Warner Cable with Comcast in the first half of 2014 set the tone for the cable subsector but that the deals’ magnitude occluded a deal volume that was otherwise relatively flat, driven mostly by the consolidation of local cable TV systems. For 2015, PwC believes that given the regulatory attention consolidation that the cable industry draws, dealmakers will remain cautious to see whether transformative deals will be approved and what impact, if any, the ultimate ruling on Net Neutrality may have on cable companies’ revenue streams and their further growth.

By marked contrast, in broadcast, PwC says that the contribution of strategic buyers in this subsector may have reached a tipping point in the US as national regulator the FCC has significantly increased scrutiny of proposed transactions and existing station groups reach the maximum number of affiliates they are allowed to control in a given geographic market.

Going forward, PwC expects that where legally possible, strategic buyers will likely continue to expand their TV platforms to gain leverage in retransmission fee negotiations. It sees potential for increased activity from private equity buyers in this space as strategic buyers start to bump up against ownership limits.